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Retirement Discussions / Retire Early CampFIRE
|Subject: Re: Tips and Tricks?||Date: 5/22/2002 1:30 PM|
|Author: justpatrick||Number: 67141 of 722212|
Tip #1: Read this board. All the tips that you will need have already been posted to this board. :)
Tip #2: How to find those tips without reading 67137+ posts: Read the FAQ, Sort the board by number of recs (click on recs and it will sort that way for you). Not all the highly rec'd posts are about RE, but that will at least give you a good idea of what some other people do. If you have a specific question, don't be afraid to look for it. If you can't find it, then post your question.
Tip #3: It matters not what you make, but it does matter what percentage of your income you are able to save. In other words, you said you make a decent income and don't have major debts. The higher your savings rate, the sooner you can retire. This works two ways. One is that by reducing the amount of money you need to live on you are reducing the amount of money that you need to retire. The other is that by reducing the amount of money you need to live on, you are increasing the amount of money you can save. I'd call this playing good defense.
Tip #4: There are many roads to retirement. Stocks, real estate, lotteries, etc. Until you figure out what is right for you, stick to the simple paths. For example, low cost index funds are hard to beat in terms of risk/return and time/money it takes to own them. Start there and if you want to find other investments down the road you can always use that base to grow from.
Real estate usually is done with larger sums of money, $500 is generally easier to invest in an index fund than it is to invest in real estate.
Tip #5: Take advantage of all the tax breaks/free money that you can. 401k matching by companies is free money. For example, a 50% match on the first 6% that you save means that if you put in 6% and that comes out to be $1000, they are putting in $500. You have gotten a 50% return on that money the first year...not even considering the tax benefits or that the stuff you invest in my grow. Roth IRAs are another great opportunity.
Tip #6: Work backwards. To figure out what it takes to speed up retirement, you need to know how much money you will need to live on, how many years after you retire you are going to live, what kind of return you can expect on your money (after inflation), how much you can save now. Make your assumptions and figure it out. I think most folks on this board tend to be overly cautious on their assumptions (plan for the worst, hope for the best). So, you are better off assuming that you are going to get a 5% return on your investments than a 20% return. I think most folks would agree that it is better to assume you won't be able to retire until you are 55 and then be surprised that you can do so at 50....rather than planning on 50 and being surprised that you can't do it until 55.
Tip #7: You have already read all those tips and are looking for more? Sometimes it is easier to increase your income than it is to decrease your expenses. If you are making $40k per year after taxes and living on $20k, you might find it very hard to get that 20k down to 15k. However, a few extra hours at work or a change in jobs might result in a bump to $60k and if you don't change the way you are living, you get an extra $20k towards your retirement fund every year. :) I'd call this playing good offense.
Tip #8: Don't believe any of the tips that someone on a message board gives you. Think about them yourself. Look at all of them skeptically. Question all of the assumptions. Look for independent verification.
For suggested reading, there are a ton of books out there. There are even book boards here at the Fool. My favorite is probably "A Random Walk Down Wall Street" by Malkiel, but there are lots of good ones out there.
Trick #1: Buy a winning lottery ticket.
Trick #2: Marry someone with a lot of money.
Trick #3: Become a pro-athlete.
Anyway, just remember that the most important thing is that you invest early and often. One thing that a lot of people do is that they build spreadsheets to track their investments, goals, costs, that kind of stuff. Try this, build a spreadsheet where you invest $1000 a month for the next 15 years at a 5% return. Now do the same thing where you invest $100 a month for 15 years at a 25% return. You should find that the $1000 a month is the better deal.
Hope that helps.
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